Futures Trading Simplified

Now-a-days futures trading in commodity market is a booming business in India. Following are the technical terms of commodity futures trade explained in simple language:

1.       Cash Commodity–It is the actual physical commodity as distinguished from the futures contract based on the physical commodity.

2.       Settlement of Cash–According to a procedure specified in the contract, it is where the seller pays the buyer the cash value of the commodity traded.

3.       Carry Forward Position–This is the situation in which client carries his open positions to the next day.

4.       Arbitrage – Here similar commodities are on simultaneous purchase or sale in different contracts or in different exchanges of the same commodity in one exchange.

5.       Clearing Member – A non clearing member should settle all the trades through a clearing member.

6.       Day Trader – It is within a single trading session, a speculator will normally initiate and offset a position.

7.       Default–As per the exchange rules, it is the failure to perform on a futures contract.

8.       Derivative–It is traded on or off the exchange and its price is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments or any agreed upon arrangement.

9.       Hedging–Hedgers take advantage of adverse price changes in the market and protect their businesses.

10.   Long – It is one who owns a cash commodity or has bought futures contracts.

11.   Price Discovery–The price level of commodity is determined on the basis of supply and demand factors.

12.   Short – One who has sold cash commodity or futures contracts.

13.   Speculator–One who anticipates future price movements and tries to profit from buying, selling future contracts.

14.   Trade Account – It is an account with the broking organization to trade in the futures market.

15.   Volatility – A measurement of the change in price over a given period of time.

16.   Warehouse Receipt – The client receives a Warehouse Receipt when the commodity sold in the futures market is taken the warehouse.

Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Gold Refining and Realty and Infrastructure. In a nut shell Abans Group is a comprehensive Financial Services and Solution Provider, which aims to provide an end-to-end financial solution to all its clients.